Is Comparing Cost Per Square Foot An Effective Measuring Tool?

Cost per Square Foot is a frequent topic of debate and though it can be a simple measurement, it only works if you are comparing apples to apples.

How can you compare two different things? Let's start with some extreme examples and then work our way back to reality. What is the cost per pound of a Ford Taurus to a Jaguar XL? What about a Dodge Truck compared to a Dodge Neon? They are different products with different features and benefits but you would not buy based on cost per pound.

Homes are the same way. First, let's level the playing field to understand why it can be difficult to compare the cost per square foot of a home.

  • Lot size
  • Floor plans (single story vs two story)
  • Upgrades (ie granite)
  • Location (McCall, a resort town, vs Parma, an agricultural area)
  • Community amenities (playground or community pool)
  • Other features of the home (i.e. pressurized irrigation, fence around home, mature landscaping)
  • Unseen differences like energy efficiencies from insulation or quality seals in doors to windows and energy efficient HVAC.
  • Age of home. Note: most new homes have warranties.
  • And much more

That is not to say that it is not something to measure but it has to be in context. For example, if one home has 1,500 ft2 between a family room,  a bonus room, and a formal living room and the other home has the same square footage between a family room and bonus room, the cost per square foot is dissimilar. It only works if you compare models of very similar homes on very similar-sized lots. If two homes are so similar, it could be a basis to make a decision or possible leverage to negotiate the price for the one you prefer, especially in today's real estate market.

It works very well when you are comparing two homes with the same floorplan by the same builder and even better if they were built in the same year and even in the same neighborhood. You could use the lower priced one to negotiate the one you prefer.

Builders may talk about price per square foot if their competitive edge is efficiencies where they can provide more per square foot in the price like Hubble and CBH position themselves. Most builders are trying to separate their homes from the competition so it is difficult to compare.

The real measure is value to you! Sometimes it may be the least cost per square foot but make sure you are not losing $ somewhere else, like monthly energy bills because the home is poorly insulated, and has leaky windows. Also, if there is a big discrepancy what does that tell you? Really, what does that tell? If the homes are so similiar it may tell you the seller is more motivated.

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